Conference Call & Webcast

Transcription

1 3D Systems NASDAQ:TDSC Conference Call & Webcast October 28, 2010 Third Quarter 2010 Results

2 Participants Stacey Witten Abe Reichental Damon Gregoire Bob Grace Investor Relations Coordinator President & Chief Executive Officer Senior Vice President & Chief Financial Officer Vice President & General Counsel 2

3 Welcome Webcast Viewers To listen to the conference via phone and to ask questions during our Q&A session, please dial: in the United States from outside the United States 3

4 Forward Looking Statements Certain statements made in this presentation that are not statements of historical or current facts are forwardlooking statements within the meaning of the Private Securities Litigation Reform Act of Forward-looking statements may involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the company to be materially different from historical results or from any future results expressed or implied by such forward-looking statements. In addition to statements which explicitly describe such risks and uncertainties, readers are urged to consider statements in the future or conditional tenses or that include the terms believes, belief, estimates, expects, intends, anticipates or plans to be uncertain and forward-looking. Forward-looking statements may include comments as to the company s beliefs and expectations as to future events and trends affecting its business. Forward-looking statements are based upon management s current expectations concerning future events and trends and are necessarily subject to uncertainties, many of which are outside the control of the company. The factors stated under the headings Forward-Looking Statements, Cautionary Statements and Risk Factors, and Risk Factors that appear in the company s periodic filings with the Securities and Exchange Commission, as well as other factors, could cause actual results to differ materially from those reflected or predicted in forward-looking statements. 4

5 Operating Results Abe Reichental President & CEO

6 Third Quarter 2010 Overview We are pleased with our performance and results We enjoyed quarter-over-quarter revenue growth from all revenue buckets led by production systems and parts and enjoyed record 3D Printer sales We expanded gross profit margin Our improved performance and record results are closing in on our long term operating model 6

7 Financial Review Damon Gregoire Senior Vice President & CFO

8 Third Quarter 2010 Operating Results ($ in millions, except per share amounts) Third Quarter 2010 Operating Results % Change Favorable (Unfavorable) Revenue $41.5 $ % Gross Profit $18.8 $ % % of Revenue 45% 45% Operating Expenses $13.7 $11.2 (22%) % of Revenue 33% 41% Net Income $5.4 $ % % of Revenue 13% 3% Depreciation & Amortization $1.9 $1.3 (46%) % of Revenue 5% 5% Diluted Earnings Per Share $0.23 $ % **Percents are rounded to the nearest whole number Planned V-Flash ramp up negatively impacted gross margin by 1.2 percentage points ($0.5 million), or 2 cents per share and legal costs of $1.9 million negatively impacted EPS by 8 cents per share 8

9 Nine Months 2010 Operating Results ($ in millions, except per share amounts) Nine Months Operating Results % Change Favorable (Unfavorable) Revenue $108.3 $ % Gross Profit $49.1 $ % % of Revenue 45% 44% Operating Expenses $37.9 $35.0 (8%) % of Revenue 35% 46% Net Income (Loss) $10.1 ($2.5) NM % of Revenue 9% 3% Depreciation & Amortization $5.4 $4.3 (23%) % of Revenue 5% 6% Diluted Earnings (Loss) Per Share $0.43 ($0.11) NM **Percents are rounded to the nearest whole number NM: Not Meaningful Planned V-Flash ramp up negatively impacted gross margin by 1.4 percentage points ($1.5 million), or 7 cents per share and legal costs of $4.1 million negatively impacted EPS by 18 cents per share 9

10 Across-The-Board Revenue Growth ($ in millions) Nine Months Production Systems $9.5 $ % Printers $8.1 $ % Services $23.4 $ % Materials $35.5 $ % Health Care $11.7 $ % 10

11 Healthcare Solutions Third Quarter Revenue Healthcare solutions revenue consists of systems, materials and services sales for hearing aids, dental and medical device applications Healthcare solutions grew sequentially by $1.5 million and represented $6.0 million of total revenue Recurring revenue from materials and services amounted to 58% of total healthcare solutions revenue Healthcare solutions revenue may fluctuate due to timing of Production Systems sales within a reporting period 11

12 Factors Shaping Third Quarter Results ($ in millions) Q3-09 Q4-09 Q1-10 Q2-10 Q3-10 Operating Expenses $ 11.2 $ 11.7 $ 11.7 $ 12.5 $ 13.7 Gross Profit Margin 45% 44% 45% 45% 45% Cash $ 24.0 $ 24.9 $ 26.6 $ 25.9 $ 33.8 Inventory $ 20.3 $ 18.4 $ 20.3 $ 22.0 $ 20.8 **Percents are rounded to the nearest whole number Available cash as of October 26, 2010 was $25.4 million after using $11.0 Improved million leverage for acquisition through activities reduced since September operating 30, expenses 2010 Net income of $5.4 million included $2.4 million of non-cash expenses Cash position increased from the previous quarter to $33.8 million, after funding our acquisitions of CEP, ProtoMetal and Express Pattern We continue to carry no debt on our balance sheet Inventory decreased $1.2 million from the second quarter of

13 Millions Q3 Revenue Composition by Category and Region $ % 47% 25% Services Materials Systems & Other $ % 34% 35% $ % 40% 44% Asia Pacific Europe North America $ % 40% 44% Recurring revenue represents 69% of total revenue Recurring revenue represents 65% of total revenue 13

14 Millions Nine Months Revenue by Category and Region 120 $ $ % Asia Pacific 14% 80 $ 76.4 Services $ % Materials 39% 14% 41% Europe 40% 40 46% % Systems & Other 31% 45% North America Recurring revenue represents 69% of of total revenue 46% 14

15 Third Quarter Gross Profit and Margin $ Millions Yr-Yr % Gross Profit Margin $ Millions Gross Profit Margin $ Margin Systems $ % $ % 371% 121% Materials $ % $ % 16% 7% Services $ % $ % 32% (20%) TOTAL $ % $ % 53% 2% **Columns may not foot due to rounding **Percents are rounded to nearest whole number Systems gross profit margin benefited from: The continued favorable impact of operational and cost improvements Better overhead absorption over a larger revenue base Reduced drag from V-Flash ramp up 15

16 Gross Profit Margin Trend Q % Q % Q % Q % Q % Q % Q % Gross margin for the first nine months was 45.4% compared to 44.0% for the same period in 2009 Higher revenue results in margin expansion from improved overhead absorption Improved margin, notwithstanding the fact that higher margin recurring revenue components made up a smaller percentage of revenue 16

17 Third Quarter Operating Expenses ($ Millions) Third Quarter 2010 Operating Expenses % Change Favorable (Unfavorable) Selling, General & Administrative $11.0 $8.4 (31%) Research and Development $2.7 $2.9 5% Total Operating Expenses $13.7 $11.2 (22%) % of Revenue 33% 41% 19% **Columns may not foot due to rounding Improved leverage through reduced operating expenses Selling, general & administrative expenses decreased to 26% of revenue from 30% in the third quarter of 2009 Increase in operating expenses due primarily to: Compensation costs due to higher commissions from increased revenue and acquisitions Legal expenses of $1.9 million primarily due to litigation concentration and timing 17

18 Days Third Quarter Working Capital Management Q Q Q Q Q Q Q Q Q Q Q Days Sales Outstanding Days Inventory on Hand 18

19 Progress Towards Long Term Operating Model ($ Millions) Operating Model Actual Results Q YTD 2010 Revenue $150.0 $200.0 $41.5 $108.3 Gross Profit 48% 58% 45% 45% SG&A 25% 23% 26% 28% R&D 8% 7% 7% 7% Operating Income 15% 28% 12% 10% Net Income After Tax 10% 20% 13% 9% Depreciation & Amortization 4% 4% 5% 5% Capital Expenditures 2% 2% 1% 1% Recurring Revenue 70% 80% 65% 69% This target model is not intended to constitute financial guidance related to the company s expected performance. It is based upon management s current expectations concerning future events and trends and is necessarily subject to uncertainties. 19

20 Outlook And Progress Abe Reichental President & CEO

21 Recent Developments We expanded our 3Dproparts services by: Acquiring CEP, ProtoMetal and Express Pattern Acquiring Provel early in the fourth quarter Adding capabilities and capacity We expanded our 3D printer reach and technology breadth by acquiring Bits From Bytes We grew our healthcare solutions revenue and installed base year over year and sequentially We expanded our reseller channel and grew 3D Printer revenues by 74% over the comparable 2009 quarter 21

22 Bits From Bytes Acquisition Proven simple technology with significant marketplace acceptance and following Complementary capabilities and price points Engineered for performance and cost Printing technology and know-how to unleash growth Marketplace credibility and presence Financial strength and flexibility Time to Market 22

23 Growth Drivers We entered the fourth quarter of 2010 with a strong sales funnel We expect 3D printer sales to continue to grow, helped by expanding channel and our V-Flash, ProJet and BfB printers growing marketplace acceptance We expect revenue from our 3Dproparts services to continue to grow globally We expect sales of our Healthcare Solutions to increase, benefiting from our expanding solutions portfolio and growing installed base 23

24 Revenue Outlook We expect continued revenue growth over prior year quarters and sequentially for the fourth quarter of 2010 We expect continued record 3D printer revenue growth driven by: Higher ProJet, V-Flash and BfB sales We expect 3Dproparts revenue run-rate to reach 15-20% of our total fourth quarter 2010 revenue We expect continued Healthcare Solutions revenue growth 24

25 Gross Profit and Operating Expenses Outlook We expect our gross profit margin to remain stable despite: Potential adverse systems mix in favor of lower margin printers Integration period of acquired businesses and V-Flash drag that is expected to decrease and end all together during the second quarter of 2011 We expect SG&A for the fourth quarter to be in the range of $ $12.0 million: Inclusive of our anticipated litigation expenses as we currently understand them Increased operating costs associated with 3Dproparts acquisitions we made thus far We expect R&D spending for the fourth quarter to be in the range of $2.5 $3.0 million while keeping pace with our planned new product introductions 25

26 Bottom Line Our sales funnel remains robust and our growing backlog reflects the strength of our business model Our Parts, Printers and Production Systems are expected to generate increased customer demand Our business model is built around significant, recurring revenue components that generate improved margins We remain committed to our long-term growth objectives and confident in our ability to provide value to our customers and stockholders 26

27 Q&A Session Out of respect for other conference call participants, please ask one question and then return to the queue to ask additional questions. Please direct all questions through the teleconference portion of this call. To ask questions: U.S.: International:

28 Thank You For Participating Replay available at